Menu

When building projects go wrong

Just a month ago I said that there had been a “plethora of interesting cases streaming out of the TCC”. I obviously spoke (or was that wrote?) too soon as, since then, the steady stream of case law that we’d got used to appears to have dried up. That isn’t to say that there haven’t been any judgments, just that there have been less of late.

This is a case all about relief from sanctions in the post-Denton world, but the claim arises out of the building works that were necessary to Mr Holton’s house following a fire in December 2010. It raises a few interesting points, ones that are certainly worth a mention.

Mr Holton’s house, Greys Mallory, is described as a grade II listed building and the fire was said to have caused substantial damage. The builder, Cockell, was engaged to remove debris and make the building safe, then he was engaged to carry out remedial works. At some point, Mr Holton’s insurers became concerned about the level of Cockell’s costs and, in September 2011, Cockell was instructed to stop work. Forensic accountants investigated the situation and found that Cockell had overcharged and had been overpaid by some £238,000. Cockell disputed this, arguing that he had been underpaid by about £200,000. He said he was entitled to charge agreed rates for labour and materials, plus a 20% mark-up for overheads and profit. Cockell issued proceedings for the outstanding sums.

In addition to the alleged overcharging, Mr Holton also made a number of allegations regarding poor workmanship in relation to the repairs at his house. He claimed that it would cost in the region of £1.6 million to strip out the work Cockell had carried out and replace it.

Counterclaim “fell well short”

It is the allegations set out in the counterclaim that were the subject of the hearing before Edwards-Stuart J. Put simply, Mr Holton’s counterclaim was badly pleaded, containing only generalised allegations of bad workmanship.

At a previous hearing, Akenhead J had ordered Mr Holton to re-plead the counterclaim, which he’d done, but it had been served late. Hence the relief from sanctions application to restore the amended counterclaim.

The amended counterclaim now included allegations of breach of duty in that the work was not carried out with due skill and care or using proper materials. The breaches alleged related to the roof, chimneys, gutters and rainwater goods, windows, stone mullions, electrical work and damage to the drive and soft landscaping. However, in Edwards-Stuart J’s opinion, the amended counterclaim still:

“…fell well short of compliance… as far as the degree of particularisation was concerned.”

In that sense, this judgment provides us with a lesson in how not to plead a defects claim: over five pages of the judgment are devoted to how the defects claim was inadequately pleaded.

It is interesting that the judgment refers to Mr Holton having instructed experts and yet, the lack of particularity in the amended counterclaim suggests that those experts might not have assisted with the pleading, even if they had prepared a schedule of defects.

It is also clear from the judgment that Cockell had not instructed experts to review the allegations in the counterclaim, primarily because it was unclear what case he was answering until after the amended counterclaim was served. As the judgment notes, since “all, or nearly all, of the work done… has now been stripped out”, there is little for those experts to inspect. However, even if Cockell had instructed experts, they might have struggled to understand the counterclaim as the judgment describes it as lacking:

“…clarity… in places incoherent and generally falls far short of the degree of particularisation required at trial.”

Substance in the counterclaim

While the judgment suggests a poorly pleaded amended counterclaim, it also states that:

“…it is fairly unusual for an extensive claim for defects prepared and formulated by experts to have no, or only little, substance.”

I can see the point being made here as it is difficult to imagine Mr Holton stripping out and replacing almost all of Cockell’s works unless there were defects. However, there are two important points to remember:

Can Mr Holton prove that Cockell’s works were defective? Simply paying for the rectification works is unlikely to be good enough. Mr Holton will also have to prove the existence of the defects. As Cockell’s experts have not had an opportunity to inspect the defects before the rectification works, Mr Holton may regret this.

What happened in McGlinn v Waltham Contractors, where HHJ Coulson QC (as he was then) refused to award as damages the costs of demolition and rebuilding of a defective building. Instead, each defendant was held to be liable in respect of the individual defects for which it was responsible. Again, it will all come down to a question of proof.

Abatement: a shield not a sword

The court was not persuaded that Mr Holton should benefit from relief from sanctions because Cockell would be irretrievably prejudiced. However, the court did give Mr Holton permission to amend his defence to rely on the same defects allegations. This was based on the principle of abatement (that is, that a party can defend itself against a claim for payment under a construction contract by asserting that the work is defective) (Mondel v Steel (1841) 8 M&W 858). Here the claim was said to be worth £240,000 and the amended counterclaim almost £800,000. Thus, Mr Holton can rely on the defects allegations to the tune of some £240,000, but no more.

The judgment suggests Cockell’s experts will be able to form a view as to whether there is any “real prospect of reducing the amount claimed” in the amended counterclaim to below the amount of Cockell’s claim for fees “fairly early”. I wonder if that is judgely code for suggesting that there is unlikely to be much merit, when they do investigate?

A case ripe for mediation?

Finally, I do wonder if this is a case that is ripe for mediation, given the multitude of issues involved (how the works should be valued, duress, multiple defects, and so on), the fact that the costs are bound to far exceed the sums in dispute and that, ultimately, there will undoubtedly be no winner. I’m sure the most hardened and battle scarred of mediators could get the parties to overcome what is described as:

“…a high degree of animosity between the parties. There is no unwillingness on either side to take any point that can be taken to the detriment of the other.”